This move of IRDA will be welcomed both by insurance companies and two wheeler owners. Many of the vehicle owners tend to forget the date of renewal, thereby making the insurance policy lapse. And as far as the insurance companies are concerned it will significantly reduce the cost of issuing policy. To that extent, and the fact that it would be paid in advance, it might even bring the premium down. A win-win game indeed.
According to an incredible piece of statistics, emanating from the office of the Indian Insurance Bureau and insurance companies, a third of the private cars plying on roads, do not possess the compulsory third party liability insurance cover. This analysis is not rocket science and has been made by the simple mechanism of comparing the number of registered vehicles with the policies issued.
Uninsured vehicles pose major challenge to other road users including pedestrians. For one, accident victims will not be able to get compensation. And for another, driving an uninsured vehicle is illegal under the Motor Vehicles Act.
A conservative estimate points to, at least three crore vehicles plying on Indian roads, uninsured. 60 per cent of two wheelers and 35 per cent of four wheelers are uninsured. A huge amount of motor vehicle premium goes untapped because of uninsured vehicles. If they are in fact tapped, the premium can even come down.
Separate body to monitor unisured vehicles...
Establishing a separate body to keep a tab on uninsured vehicles is the need of the hour. A database of vehicles that is uninsured even for third party cover should be created. Today, if you forget as to with whom your vehicle was insured it’s not possible to find that out although there will be any number of insurance companies which will tell you when your policy is falling due!
RTO and police should join hands
The data of uninsured vehicles as also of policies falling due can be shared with insurance firms who can follow up with vehicle owners for renewal. The data may also be shared with RTO and police to track these vehicles and bring them inside the insurance umbrella. A concerted effort by insurance firms, the regulator IRDA, General Insurance Council and the government will help solve this issue. The job can also be outsourced to an agency that can collate the required data by liaising with vehicle manufacturers, insurance companies and RTOs to keep check on the uninsured vehicle population. The streamlining of the issue of passport by involving TCS is a good example.
Two wheeler insurance portfolio is not loss making, compared to the commercial vehicle segment, where claim ratios are high. The collection of three-year third party premia in advance would help the insurance industry to manage effectively the funds to offset the losses incurred in the motor third party segment through liberal judicial awards in favour of the road accident victims.